Trader Monthly, which released its figures last week, also
said Paulson was the highest paid, earning an estimated $3
billion.

Paulson, who now oversees roughly $28 billion in assets,
earned his payout by standing conventional wisdom on its head
and betting U.S. housing prices would decline nationally, and
that investment-grade mortgage bonds would default in record
numbers.

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"Some managers have profited enormously from the collapse
of the U.S. subprime mortgage market," the magazine said in a
report published on its Web site. "However, making money has
gotten more difficult as banks that were caught holding
troubled subprime paper have reduced lending to hedge funds."

George Soros, the philanthropist fund manager who was
reported to have earned $1 billion by betting against the
British pound in 1992, was the next-highest-paid manager. He
took home $2.9 billion this year, Alpha Magazine said.

Following close behind Soros was James Simons, a former
mathematics professor turned fund manager, who runs hedge fund
group Renaissance Technologies and took home $2.8 billion.

Ken Griffin, who founded $20 billion Citadel Investment
Group from his college dormitory room, followed behind in the
number-five spot with an estimated $1.5 billion payout, Alpha
Magazine said.

Hedge funds are traditionally secretive because they want
to protect their trading strategies from would-be competitors,
and so their managers' salaries are similarly shrouded.

But the numbers began trickling out last week and sent a
new round of shock waves through turbulent markets at a time
when U.S. job losses are mounting, growth is slowing and the
housing crisis seems to be deepening.

The Alpha survey also said so-called funds of funds,
portfolios that try to minimize risk by selecting a group of
hedge funds for clients like pension funds, earned far less
than the highest-paid hedge fund manager.

Chief executives at those firms took home an average $1.8
million, including bonuses.

Average take-home pay for junior traders at multi-strategy
and single-manager firms topped $200,000 in 2007. Meanwhile,
pay for senior traders was an average $819,000 at
multi-strategy firms, and topped $1.6 million at single-manager
hedge funds.

(Reporting by Svea Herbst-Bayliss, with additional
reporting by Emily Chasan in New York; Editing by Braden
Reddall)